Books Review Feature QBO

Hi there, Linda Artesani, Artesani Accounting. This week is all about the things that you do to close a file at the end of the year. Now, it's not quite the end of the year, but this is a good practice and you actually should be doing this monthly for your client files. But if you have a new client and it comes to you and you haven't really— you already— you're in the middle of doing a cleanup and you get the file from maybe somebody else and now you're trying to get the file done for the year, I'm gonna give you some steps. So I'm gonna use the month-end review tool that's built inside of QuickBooks. I have to say that I've looked at it and I've had some troubles with it, so I, I don't think it's beta anymore, but it's not worked all that well. And we'll see if it does that for me today or if it actually works the way it's supposed to. What I really like about it is that it does let you see with a pretty high level of visibility where you should be looking in a client file to see some of the areas of concern. So there's a few places like undeposited funds and uncategorized expenses or asset that you're going to see listed on the month-end review that are places you want to look. And those are— those tend to be if a client did their own accounting, they'll just fly through the bank feed and it's what it suggests to you to put it there. So it ends up going there. And when you see that, you might say, oh, that's interesting. Why did they put it there? It's because the bank feed suggested it. And a lot of clients really don't understand how the bank feed actually works. As we get further in here and I show you— I'm going to show you some of the methods that I do. In a file that you might say, well, why are you doing that if you're not following through that month-end review? Well, I've been doing this for so long that it was before month-end review. So it's not— it's a newer, newer tool to me. So sometimes I just do it the way I've always been doing it. But it's a good practice. I'm going to show you some of the things that I do. And I think kind of combining the two, let's just see if the tool works. Let me share my screen. So right off the bat, we're in my demo file. And right off the bat, I noticed it's not called month-end review, it's called books review. So they changed the name. Which makes sense because there's only so much space on the toolbar. So we're going to go over here to the left toolbar and grab Books Reviews. So let's take a look and see what's in this file. I'm actually not— I'm going to change the review date. So I'm going to just pick last year because I know there's more data in here for last year. I'm going to hit Apply. Let's just kind of go through this section here. So right off the bat, I can see that there's a check that's booked to Uncategorized Expense. So these are your open issues. There's 8 transactions in the bank feed that haven't been addressed. You definitely want to get those in if you're looking at a record. Say this is 2021's records, you're looking back at it from 2022, you want to definitely come in here and put them in because that's kind of an indication that it's not reconciled. So as we come down here, or they could have been that they brought them in and they, they brought them in twice or duplication and they need to be excluded. But either case, you want to take care of those So here's an expense that's booked to Uncategorized Expense. And as you can see, if I click over here and select it, I can reclassify it, but I don't know what it is, so it's kind of hard. It's a check 2150. So I'm gonna have to actually go on to the bank, the bank for this client, and then look up exactly what check 2150 is and then put it in. But if— let's just say I do know this is a, um, deposition fee. I'll come over here to the right-hand side. I'll go to Edit. That's my choice. This Actions is just Edit, so I don't have a lot of choices there. I can edit from there. I'm sure I can just click on the transaction as well. So I'm gonna hit Edit. And it worked. And then I'm just gonna come over here and I'm just gonna put Sargent's— oh, just put court reporting. Let's see. I don't even know what I have in this file. Courtroom services. We'll just use that. And then I'll make this— there's an open bill for this client from 2019, but I'm just actually gonna put this as Advanced Client Costs, and I'm going to put it to a matter. And obviously I wouldn't know what matter it would go to, but I'm going to put it to, um, I'll put it to the New Will for Jonathan Fishman. And then I, I know he's got for a class he's working with, I'll just pick, uh, initials. So here we go, and I'm just gonna hit Save. And now that's all fixed. And if I close out of here Now there's nothing uncategorized, so there's nothing to review. And this is what makes this tool pretty sweet, right? Transactions with payees. So if your client did their own books, guaranteed there's transactions without payees. So why do you want a payee? You want a payee because you want the payee on there. It helps with looking for the Reclass tool, which we'll get to at the end of this video. So I can see here it's Rainbow Water Bill and it's showing up, so I can come over here and hit Edit. I don't know if it's just going to let me take edit without selecting it. I can void and delete from here. So I'm just going to grab it, and then I'm going to put in Rainbow Water, and that might be my client, right? Or Utilities. I'll put Utilities, I'm guessing. But like I said, this is a fake file, so— and it doesn't have that vendor. And I'm just going to hit Save. And then it's to Utilities. And then obviously, maybe the class for this is maybe the firm's paying for utility bills for itself. I could put that in the General and Admin, which I don't know if we have in here. So I could do General. You should probably have a General and Admin category because if you're classing transactions, you want to class them all. And then this would kind of fall into the bucket of overhead for the law firm. And I'll hit Save and Close. You don't typically pay the water bill, but you never know the scenario. So now I'm through there. And as you're starting to see this, so I don't have any unapplied payments, but if I did, I'd want to go and look and see why were they unapplied? Maybe there's no invoice attached. So that's a good reason that you want to take a look and see, well, a payment was brought in for a client, but there's no bill. What happened there? It's another thing you might see. Undeposited funds, there's nothing here, but if there were some here, you'd want to look at that and say, why were things still hanging? Obviously, this is looking at that— it's looking at that moment in time of that year. So you want to look in there to see, is there any undeposited funds? This is one of those places, and I can tell you a really horror story where I examined a file for a cleanup and I forgot to look in the undeposited funds account and there was a whole bunch in there and I ended up having to eat the cost of doing the cleanup because I missed this big, big section, this big body of work. So you want to really check and look for that. So I've got a to-do list down here so you can check for transactions without receipts. If they're doing receipt capture, you want to bring in here and kind of look here to see because you can do receipt capture right inside of QuickBooks. Review any loan payments made. There's no loans in this file, but you could look there too. Obviously, undeposited funds. I'm not sure why that's there twice, but you can see that. And it actually has, make sure you understand why this item is outstanding. So it's nice. Good. And then any cash info. Were there anything, you know, anything that was recorded as a cash transaction? Maybe it's petty cash. Typically in a law firm, you might see petty cash, although that's kind of old school, and we tend to recommend our clients to use like a Divvy or Truly, a new bank account that we just signed up for. That's great. And if you're more— if you're interested in hearing more about that, you can actually give credit cards to your staff and you can control how much money that they have on it. It's a really wonderful tool, and I can give you some information about that. And then you can get bank statements if they're available. I've not had many clients that have the bank statements available in their file. So that's it on that. But now we can move over to the next section. So that's the first section, that's the transaction review. Now we're going to move over to the account reconciliation. So, so far so good. The tool is working. Last time I— Okay, so after about 5 times of seeing the wait button, I actually had to log out of QuickBooks, log back in, and then I hit Account Reconciliation and it loaded. So there might be some things going on there as well. Uh, now I'm on the Account Reconciliation. You can see that the last time these were reconciled, and some of these were never reconciled. So obviously in this file, I have a lot of work to do to get these accounts reconciled through 12/31. You can see that the— and it's really bringing up all the balance sheet accounts. This is really nice to see. So it's also, if you work with trust accounting, it's going to bring in all the trust accounts. So there'll be a lot of accounts sitting under here. Now, that being said, if you're using a tool like I'm using LeanLaw, we're going to go over and look at that. So I probably won't hang out there too much. Now, I love this part because this is something that often gets missed, and it's the outstanding transactions. So under the outstanding transactions, these are things that never cleared the bank. And I'm looking at The fiscal year of 12/31/2020. So that fiscal year, calendar year, and I'm seeing that there's some things in here that are quite old, and I want to address this with the client to see why weren't these— why weren't these things clearing the bank. Some of these might be as a deposit in here. That's certainly a deposit should have cleared. So as we go through here, to-do list: reconcile your loans and then reconcile your cleared transactions. So that's that. You can actually select accounts if you wanted to track specific accounts. And then we'll go to the final review. And in here you can look at unusual or unexpected balances. Personally, for me, this is great, but I'd really rather go through the balance sheet and look at a balance sheet comparison and a profit and loss comparison. And we'll get into that as well. And then obviously, as you get done with your, your review, you can wrap it up. You can prepare your reports right from here. Let's see what they have for reports. And you could set it up to pick a report package. BAS Workpapers. I don't know what that is. You can do— well, that's interesting. So I don't know what these are. Basic Company Financials. And then I can open them. Oh, it's going to use these, the management reports. Okay, so it's going to bring the management reports. If you've never used them, they look nice. I'm not quite to that point yet, but you could do this and send the report package to your client. And then close the books fully, which is very, very nice. So I could send it to my clients. That's, that's kind of cool. And then close the books. And so what that's going to do is when you go to your list, when you log in as a ProAdvisor, you're going to see on that list where the books have been closed to a specific date. So that means it's complete and you don't have any questions, maybe for your clients. So prior to that, you want to address any open items. We use an Ask Need Help instead of the Ask My Accountant. We use Ask Need Help. for our clients so that we can work through that. We also use some Keeper, which is very interactive with the clients, as opposed to this where it's like I'm doing this work and I'm sending it to the client and then I have to come back and fix it. Keeper allows you to— it's an app you can use and it sits inside, it connects to QuickBooks, and it's in another page where you would actually go through this very similar, but you can go to that Ask column and ask the client, and the client can answer the questions and it will book it in. So it's automation. That's a no-brainer, right, over this. So now let's go to— I'm just going to go to Reports. So this is part I wanted to show you because this is something that I typically do. So I'll go to the Profit and Loss Comparison. I'll also go to the Balance Sheet Comparison. I'll just do one for now and just look and see. So I'm using last year, so I'm looking at the prior year, and you can see very, very quickly, like, there's problems, right? Look at the difference in my income. Why was that in 2020? My income dropped. That could be COVID. There could be many reasons, but you want to take a look at that and just start going through the accounts. So obviously, if income dropped, wages dropped. So you might already know these answers, but it's definitely— you didn't need as many outside consultants. So you're just going to go through here, look for things that are in the parent account, look for drastic differences. And obviously this file doesn't have as much data in it, so you want to look at those unapplied cash payment income accounts and the cash billable expense here, cash bill payment expense. Uh, and that's because I'm looking at the records in cash basis. If they're accrual basis, you would look there. And just kind of go through. And then if there's an Ask category, you want to do that. One of the things we do, what we've done in the past, if you don't have Keeper, you can actually take that Ask column. If you have questions for your client, you put them in the Ask, Need Help, or the Ask My Accountant, and then you can set it up as it's blown out into detail, save it, and then send that to the client every month. These are the questions I have. So you just use that tool and automate it because you can automate sending reports. Very important. So we're going to the balance sheet comparison here, and you can see that, wow, there's not much going on, but there's a lot more bank activity. A clearing account that has $90,000 is not good. You need to address that. It should be zero at the year end and kind of go through here. Now, one of the things I want to look at is my bank trust accounts. I want to see what's in my trust balance. So I have $17,000 here. It looks like I got $242,000 here. And then when I come down to look at my funds held in trust, and I'll collapse that, I'm looking at $87,000. So there's a problem. If you work with law firms, you want to reconcile advanced client costs. I have a whole article on that. And then you also want to be sure that your trust— individual trust balances— all these are your monies that are held per client, right? I just rolled it up to $87,997.03. Over here, I don't like how this is set up. So what I would typically do is everything's under the bank account parent. I would have a trust account. I would have operating bank and trust header. And then I put the trust account so I can do the same thing. I can collapse them to see if my totals line up. I can already tell that they don't— they don't line up, right? Because $242 plus $17 do not equal what I have down here in my trust account. So I'm going to have to dig in there and find out why. Now I can see there's— here's a trust account kind of hanging out in the space. And so it's not with the other trust accounts. That could be because you have more than one bank. You should have separate parent headers for each bank account that you have that's in trust. So they shouldn't all be together, they should be separated. If they aren't— if they are all together, it's okay, it's not the end of the world, but you want to have that separation because you want to be able to roll up each one and then see what bank— the bank balances for that particular one, and then you'll know which bank account has the issue if you've got a trust account that's off. So it just makes looking at the trust account a little bit easier. Opening balance equity, where I have do not use, clearly somebody booked to it. We want to look at that and correct that. And then just look and see if there's anything here that seems out of place. If there's a lot of things going on here that differing values, you just want to look and see, is anything stick out? Is there any negative accounts that stick out? So Visa card payable, and you've got Fred and Mary and they've got a negative balance. Did they overpay their credit card? It's a liability. Yes, you still owe that money, but it should be positive because it's a liability. So you want to check that. You just want to go through. I can see here that my fixed assets are negative $91.38. That could be just from the adjusting, the depreciation, accumulated depreciation transactions, journal entries. Maybe I needed to adjust one because something was fully depreciated. So you want to look there as well. Advanced client costs shouldn't be negative. We got to look there. So there's a lot of cleanup here. The clearing account, a lot of cleanup. Last thing I would do is I would go to LeanLaw and I would pull up— this is the same account. You can see here I went to billing, ready to bill, and then I pulled up my trust account. And you can see here that my total client balances are only showing as $22,000. Liability balance is $30,000, and I have $111,000 in the bank for this one particular bank. I can already see here that there's only one bank showing where there were 2 trusts in that bank account. That's a problem. There's just some issues in this file that are— there's a lot of work to be done in this one. So if this is your client, you have to spend the time to help make their work correct and accurate for tax time. I know that was a big video and a lot of places we went through, but basically I wanted to look at the books review with you to see what you think of it. Yeah, I had that problem where it kind of hung, but I was able to get back in, and I think it's really awesome. It's, it's a fascinating tool, and it does the things that we would do manually, and this way nothing's missed. So I really highly recommend that this tool works and use it and start to use it in your practice monthly. The last step that I didn't show on this video is to go into the reclass tool. I just go through the reclass tool for the entire year and I just sort it by the vendor name or the client, the client name. And then I just go through it and I just look and make sure that everything that is in every category aligns with the transactions in there. If it's auto expense and it's gas or fuel, I want to see like Mobil and Sunoco and Shell in that category. So you just want to go through that as the last step because now we looked at it at a very summary level and we want to look at the detail. And that's where the Reclass tool will come in. And then you can fix it really easily and quickly. So there's a lot of work I have to get done in this file, and I hope this was helpful. If you want to learn more about these kind of things, join our Accountants Law Lab. If you're a bookkeeper and accountant, We— this is the stuff that we do. This is the work that we do. This is the brainstorming we do. If you are— you work at a law firm or you are an attorney that's looking for an accounting staff, it's what we do. So give us a call. And if you like this video, please hit the like and please hit subscribe so you don't miss any more. I've got some good ones coming up in the next several weeks. And with that, on that note, I hope you all have a wonderful, wonderful day. Bye now. Bye.